Pennsylvania Association of School Business Officials Annual Conference Seminar Topic: Investment: Assessing Risk and Maximizing Returns in the Current Interest Rate Environment March 19, 2003

Seminar Presenters Gregory A. Ewing Senior Vice President Parker/Hunter Incorporated Paul V. Kelly Business Manager Pocono Mountain School District Jeffrey T. Sultanik, Esq. Fox, Rothschild, O’Brien & Frankel, LLP

Legal School District Investments Securities Legal Investments Business Managers’ Liability Lessons from Black/Devon and Bentley

Securities Creation Issuance Registration Disclosure and information Deceit, misrepresentation, other fraud and manipulation

Legal Investments Consistent with sound business principles - Prudent investor standard of care  Purchases made by treasurer or resolution adopted by the Board

Investments 1)U.S. Treasury Bills 2)Short-Term Obligations 3)Deposits in Savings Accounts or Time Deposits or Share Accounts

Investments 4)Various Obligations of U.S. or Commonwealth 5)Shares of an Investment Company 6)Pooled Assets

Business Manager Liability School district’s discipline or dismissal Negligence Willful or criminal violation Political Subdivision Tort Claims Act Legal Regulatory

Lessons from Black/Devon  Reports from the investment advisor  Invest in legal securities  Have and follow Board approved investment policy  Investment pool should have top rating  Black’s collateralized investment pool (derivatives)

Lessons from Bentley  Do not invest in “privately held notes”  Created  Issued  Registered  Communication to and from the registered investment advisor

Lessons from Bentley  Required “due diligence”  Check with SEC to determine registration  Have legality of investment and any agreements reviewed by solicitor  Do not rely on another school district’s work  Utilize investment firms and investment advisors that have a proven track record  Regularly request updates and verifications from all investment advisors or firms

Evaluating Investment Risk  Credit Risk (know your investment provider)  Market/Interest Rate Risk (know your investments)  Collateral/Safekeeping (know how your assets are protected)

Maximizing Returns  Cash Flow Analysis and Application  Matching Assets to Liabilities  Diversification  Investment Providers  Investment Types

Resources Available to the Business Office  In-house Staff  Associated Professionals (Solicitor, Bond Counsel, Auditor)  Investment Providers  Independent Investment Consultant